The Ins and Outs of Incorporating- What a Startup Needs to Know about Getting Organized

Incorporating your business is obviously not a step to take lightly, and if you’re already on your way to doing it, no doubt you’ve done plenty of research.  Despite the fact that it requires extra paperwork and in some cases, more tax liability, incorporation can be a great choice for many businesses for several reasons.  A corporation can continue on after the death of its owners, transferring shares is fairly simple, and it makes attracting new investors far easier, which is great news for startups.  As owner of a corporation, you’re protected from personal liability from company debts and obligations.

Once you’ve decided to incorporate your company, how do you get started? Your first step should be to check with your state’s corporate filing office to make sure the name you want to use for your company isn’t already claimed.

Then you’ll need to request forms, schedules and fee information from the secretary of state, or the office responsible for registering corporations in your state.  You may not have to contact an attorney to help you at all if you have a good guide to incorporating in your state; you can also use one of the many incorporation services that will prepare and file the documents for you.  The registration fee for these documents is usually between $200 and $1,000, depending on where you live.

You’ll also need to prepare your ‘corporate bylaws’ (these don’t get filed).  They essentially outline corporate housekeeping details like when your shareholder meetings will be held, who can vote in them and how shareholders will be notified if there is any need for other meetings.

The entire process is remarkably simple if you don’t plan on selling shares of your corporation to the public.  The biggest changes in your day-to-day business operations will likely just be related to secretarial tasks like recording important business decisions, as well as holding annual meetings.  Accurate financial records are key – you must be able to show a separation between the corporation’s income and expenses and those of yourself and any other owners.  And, all references to your business should identify it as a corporation using Inc. or Corp., whatever your state mandates.

Of course, it’s important to be familiar with and follow your state laws for incorporation.  If you don’t, the courts can ‘pierce the corporate veil’ and hold you personally liable for your business debts, which goes against the whole reason for incorporating in the first place.

Learn about your state’s requirements at USA.gov

Photo credit: Flickr user llawliet

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